Management Consultant

A business strategist and economist with more than 25 years experience in management consulting, business and government. Specialties include Retail Lifecycle Management, supply chain strategy and operations, and business transformation.

Thursday, April 24, 2008

In 1954 Ray Kroc, a Multimixer salesman, took notice of the restaurants started by Mac and Dick McDonald in San Bernadino, CA in 1948. McDonald's was a highly focused, highly visible operation, featuring a simple menu (hamburgers, cheeseburgers, French fries, shakes and fountain soda), high quality ingredients and walk-up windows. Kroc partnered with the Brothers McDonald to franchise their speedy service system, then worked out the means to secure financing and expand the concept.

Kroc's unique genius was his ability to organize a highly distributed business network that promoted efficiency and rapid growth. Rather than waste resources on vertical integration, Kroc kept McDonald's operators focused on delivering a high quality experience to consumers, what he called "Quality, Service and Cleanliness."

Behind the scenes he built his enterprise by partnering with experts to provide essential services that his business lacked the scale to provide efficiently on its own. He and his small, entrepreneurial staff rapidly and successfully extended the enterprise by concentrating on core development processes:

Maintaining control of product quality and operations

Securing long-term rights, by lease or ownership, to the most promising restaurant locations

Recruiting and training highly motivated franchisees

Advertising the the service experience and promoting the product

Securing a reliable stream of ingredient supply

Designing efficient operations and accommodating them with functional, distinctive and attractive structures

Just as he had franchised operations to small businessmen, he partnered with key suppliers, including Golden State Foods, Interstate Foods, Perlman Paper Company, and later Martin-Brower to franchise supply and distribution operations. The evolving McDonald's Corporation (MCD) maintained absolute control over its core product offerings, advertising characters and messages, but allowed local operators to run their own promotions and even introduce trial products. Corporate officers qualified and approved suppliers and negotiated materials specs and service terms with them, but groups of local operators chose which of these suppliers would serve each market.

Grinding it Out: The Making of McDonald's, by Ray Kroc with Robert Anderson (Chicago: Contemporary Books, Inc., 1977)See also related posts on Enterprise Architecture, Supply Chain, and Retail Lifecycle Management (RLM) by selecting topics from the Index of Topics on this Site in the sidebar to the right of this blog.